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Old 01-08-2022, 08:10 AM   #41
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Originally Posted by OverThinkMuch View Post
I did not say you should continue to hold bonds.

My comment about recovery was meant to refer to my earlier comment, which was more specific: I meant the several months after Ray Dalio's prediction.
Thanks for clarification -- now I'll clarify my comments.

I didn't say you said that. My point was that there has been a lot of discussion in recent time about bonds & what place they have in someone's portfolio. Different people have different needs, time horizons, etc. Lots of people have been defending their reasoning. Through what I've seen, I don't recall anyone else saying bonds have recovered nicely, etc. That's all.

Djbrown had 2 questions & clearly stated his opinion...which I agreed with.

I hadn't done the math on BND's performance. I did see your post about "adding back in" the interest; not really sure what that means, but I assume it means reinvest. So, I looked at a couple of sources for approximate time frames. Haven't found one yet that gives a "positive return over that time" as was suggested. Even if it did, that would be nominal -- not real return.

Were Dalio's comments helpful to me? Kinda hard to say for me since they're almost a year old. I didn't listen to all of it (I didn't hear him give explicit time delimiters for example), but I understood it. On both his inflation & bond/cash comments. I was of like mind in March 2021 & so perhaps easy for me to get it. With hindsight, I don't see any data to show he wasn't right in this case. I know many disagree with anything/everything he says.

But to each his own. At least his own opinion & data is what it is regardless.

Happy investing!
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Old 01-08-2022, 08:58 AM   #42
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Originally Posted by OverThinkMuch View Post
That's not how bonds work. You can't select prices and ignore the interest generated between those two dates, like you just did. A bond fund generates interest, which you ignored. Add back in interest, and it has a positive return over that time, and not as you claimed "BND was a dog in the past 12 months"
You are correct about adding back yield. That would make BND today worth about 80.50 in March 2021 dollars a bit less in January 2021 dollars.

It is still a dog that lost money in last 12 months since 12 months ago it was worth about 87 bucks. This is no surprise since bonds usually don't perform well in high inflation, very low rates and future rising rates environment.
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EOI PDI JEPI for monthly income
Old 01-08-2022, 09:47 AM   #43
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EOI PDI JEPI for monthly income

Bottom line is most folks need some bond/monthly income to smooth out drawdowns, 2 of the 3 above have been time tested and JEPI is new but backed by 4 Billion in AUM and JP Morgan wealth mgmt puts their best clients in JEPI.

I look at these fixed income plays as "PRE-BUYING" the return of the S&P 500....so you get between 6 and 10% yearly divy income that is of course taxable plus with some luck and time, the principal actually GROWS as well over time. To each their own, but this is what I'm doing....
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Old 01-09-2022, 06:06 AM   #44
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You could have a look into Value at Risk.https://www.investopedia.com/terms/v/var.asp
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Old 01-09-2022, 06:40 AM   #45
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You could have a look into Value at Risk.https://www.investopedia.com/terms/v/var.asp
Yep, another tool in the toolbox with some value and some warts.
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Old 01-09-2022, 08:27 AM   #46
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You could have a look into Value at Risk.https://www.investopedia.com/terms/v/var.asp
From that article:

"The financial crisis of 2008 that exposed these problems as relatively benign VaR calculations understated the potential occurrence of risk events posed by portfolios of subprime mortgages. Risk magnitude was also underestimated, which resulted in extreme leverage ratios within subprime portfolios. As a result, the underestimations of occurrence and risk magnitude left institutions unable to cover billions of dollars in losses as subprime mortgage values collapsed"

You could argue the same thing happened with meme stock GameStop (GME) during Jan 2021. No sudden spikes upwards for a long time, then a short squeeze costing hedge fund billions of dollars - much larger than their positions or expected risk.
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Old 01-09-2022, 08:42 AM   #47
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You are correct about adding back yield. That would make BND today worth about 80.50 in March 2021 dollars a bit less in January 2021 dollars.

It is still a dog that lost money in last 12 months since 12 months ago it was worth about 87 bucks. This is no surprise since bonds usually don't perform well in high inflation, very low rates and future rising rates environment.
Are we discussing bond performance after Ray Dalio's video? You keep bringing up bond performance before his video - predicting the past is not interesting. I predict high growth, high P/E stocks will do badly last month - I'm right! That's what you're applying here, when you talk about bond performance which Ray Dalio already saw when he made the video. It's not relevant to his prediction.

I rarely see anyone factor inflation into performance. I suspect if I went through your past posts, I would almost never see it factored into performance. It looks like you're trying to be right about bonds using inflation. After Ray Dalio's Mar 27 prediction, bonds went up for a few months. As of now, they are up very slightly from their start when you include interest in their total return. That is not "a dog", which I usually see ascribed to poor performance over many years.

People who bought 10% treasury bonds in the 1980s did extremely well, so high interest rates by themselves are not the problem. Repeated rate inflict losses on bonds equal to their duration, although the loss isn't uniform across all durations. The last point that bond rates are low, in my opinion, was caused by a Fed mistake.

Early in 2021, the Fed called inflation transitory. Chair Powell only admitted that as a mistake in November, after it was clear to everyone the Fed was wrong. The Fed predicted 2 rate hikes in 2022 back then, which has gone up every month to the current 2 rate hikes. The Fed is playing catch up.
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Old 01-09-2022, 08:51 AM   #48
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Bottom line is most folks need some bond/monthly income to smooth out drawdowns, 2 of the 3 above have been time tested and JEPI is new but backed by 4 Billion in AUM and JP Morgan wealth mgmt puts their best clients in JEPI.

I look at these fixed income plays as "PRE-BUYING" the return of the S&P 500....so you get between 6 and 10% yearly divy income that is of course taxable plus with some luck and time, the principal actually GROWS as well over time. To each their own, but this is what I'm doing....
JEPI is not a fixed income ETF, it's an equity ETF. It's 80% equities. In 2021 it's performance was 21.5% versus the stock market's 25.7% (VTI). Where did you see the claim that fund is fixed income?
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Old 01-09-2022, 09:12 AM   #49
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Haven't found one yet that gives a "positive return over that time" as was suggested. Even if it did, that would be nominal -- not real return.
Ray Dalio did not predict "nominal" performance from bonds, he said it would be much worse than usual. So if you agree bonds didn't do much, then it follows that Ray Dalio's March 27 2021 prediction for bonds was wrong.

BND closed on Mar 26 2021 at $83.28, right before Ray Dalio's weekend prediction. It is currently $83.56, which is higher. You can check Yahoo Finance for that data, under historical data.
https://finance.yahoo.com/quote/BND/history?p=BND

But that ignores interest, which Vanguard displays under "distributions" on it's website. I count $1.53073 of interest and gains since Mar 27 2021. So that needs to be added back to the $83.56 share price to get the total return.
https://investor.vanguard.com/etf/pr...tributions/bnd

$83.56 + $1.53 = $85.09
And now the performance: 85.09 / 83.28 = 1.02117, or +2.2%

A return of 2.2% is not a disaster, so from the data I conclude Ray Dalio was wrong.
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Thoughts on PDI and EOI?
Old 01-10-2022, 10:59 AM   #50
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Thoughts on PDI and EOI?

Quote:
Originally Posted by OverThinkMuch View Post
JEPI is not a fixed income ETF, it's an equity ETF. It's 80% equities. In 2021 it's performance was 21.5% versus the stock market's 25.7% (VTI). Where did you see the claim that fund is fixed income?
Thank you for correcting me on JEPI, its not fixed income. Thoughts on PDI and EOI? JEPI is still useful for monthly income in retirement, rather than selling 4% a year of VTI....right?
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Old 01-10-2022, 11:43 AM   #51
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Most of my assets are at Vanguard, which doesn't have much in the way of tools. Another example is my Roth IRA, which didn't lose much then suddenly shot upwards. Anything very profitable is considered volatile and therefore risky by most defintions.

I couldn't find Tesla's standard deviation on Yahoo or Morningstar, but I think it illustrates the point. It has a 5 year standard deviation of 57%. Did it ever lose 57% in the past 5 years? No - the volatility is based on upwards moves - and that, I claim is not risk.
Tesla Inc (NASDAQ: TSLA) Stock Report
Hi OverThinkMuch
If we have two stocks who develop like
a)
10 -> 12 -> 15 -> 19 -> 24 -> 31
b)
10 -> 12 -> 14 -> 16 -> 18 -> 19
None of them went down, but both have a standard deviation and volatility.
c)
10 -> 9 -> 8 -> 7 -> 6 -> 5 -> 4
It goes down all the time.
It is also having standard deviation and volatility.

Maybe you are not looking for something that measures investment risk, but for something that predicts investment results or prevents losses from happening.

A lot of people may disagree.
My opinion, risk management, risk measurement, performance attribution, benchmarking. All this stuff has not been invented to prevent losses from happening. That stuff helps to describe the characteristics of a portfolio and it can explain afterwards why the portfolio under - or outperformed a benchmark in a certain period of time.
In addition it helps to value Options and Warrants.

Regarding upward moves.
It is a risk, the risk of not being invested when it goes up.
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Old 01-11-2022, 11:36 AM   #52
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Seems a good time to recall Mr. Buffett’s “bleak future” assessment on bonds in the 2020 shareholder letter. The outlook for bonds hasn’t materially changed since that letter was written in my view.
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Old 01-11-2022, 12:35 PM   #53
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Seems a good time to recall Mr. Buffett’s “bleak future” assessment on bonds in the 2020 shareholder letter. The outlook for bonds hasn’t materially changed since that letter was written in my view.
That letter was I think from February 2021.

The outlook for bonds and cash is even worst today. Buffet is saying that for few years now. He also owns ton of cash though
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Old 01-12-2022, 07:22 AM   #54
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Thank you for correcting me on JEPI, its not fixed income. Thoughts on PDI and EOI? JEPI is still useful for monthly income in retirement, rather than selling 4% a year of VTI....right?
Bond income is taxed like ordinary income, while selling VTI would be taxed at lower long-term capital gain rates. So selling VTI (or taking stock dividends) would save you money in taxes. Currently VTI issues 1.1% dividends, so you'd only need to sell 2.9%.
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Old 01-12-2022, 07:30 AM   #55
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... standard deviation and volatility.

Maybe you are not looking for something that measures investment risk, but for something that predicts investment results or prevents losses from happening.

A lot of people may disagree.
My opinion, risk management, risk measurement, performance attribution, benchmarking.
...
Regarding upward moves.
It is a risk, the risk of not being invested when it goes up.
Most of my portfolio is passive (ITOT / IXUS), which I've held through the 2008 financial crisis. A measure of risk should look at what crashes someone has experienced, and how they reacted.

There are many possible investments, not just "it" that goes up. I sold Nasdaq 100 investments because of inflation, P/E values, Covid-19 risk, Fed risk and overall a risky year with a highly optimistic stock market. But that market timing just moved me from Nasdaq to Financial sector ETFs. So maybe risk would involve selling down to cash?
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Old 01-13-2022, 03:19 PM   #56
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Most of my portfolio is passive (ITOT / IXUS), which I've held through the 2008 financial crisis. A measure of risk should look at what crashes someone has experienced, and how they reacted.

There are many possible investments, not just "it" that goes up. I sold Nasdaq 100 investments because of inflation, P/E values, Covid-19 risk, Fed risk and overall a risky year with a highly optimistic stock market. But that market timing just moved me from Nasdaq to Financial sector ETFs. So maybe risk would involve selling down to cash?

You could discuss this topic in a forum for Technical Analysis and Chart Technique. They may know a suitable risk measure.
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Old 01-14-2022, 06:44 AM   #57
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You could discuss this topic in a forum for Technical Analysis and Chart Technique. They may know a suitable risk measure.
I have no interest in Charting. They try to predict stocks, not assess risk. In my view, it's bogus. But if enough people do it, I imagine it's useful knowing what other investors will do. But I steer clear of it.
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Old 01-15-2022, 06:43 AM   #58
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I have no interest in Charting. They try to predict stocks, not assess risk. In my view, it's bogus. But if enough people do it, I imagine it's useful knowing what other investors will do. But I steer clear of it.
If we assume for a moment, we have two funds.
Both from Blackrock iShares following a different strategy.
In a period of one week, both went down by 3%.
What kind of information or insights do you expect to get from a risk measure?
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